Coinbase Cryptocurrency Exchange Announces to Pay 4% Annual Interest on USD Coin Holding

June 30, 2021
Coinbase Cryptocurrency Exchange Announces to Pay 4% Annual Interest on USD Coin Holding

Coinbase, the largest cryptocurrency exchange in the United States, has announced that a 4% annual percentage yield (APY) can be earned by its users by lending out their holdings for the U.S. dollar-pegged stablecoin USD Coin (USDC).

The company is urging its users to hold USDC as an alternative to a fiat savings account. They say that holding USD Coin at Coinbase exchange will give them a better ROI than saving fiat money in a typical savings account in the US. Most of the savings accounts in the USA provide customers with less than 1% on the US Dollar. There are many cryptocurrency platforms that provide around 8% yearly interest for lending US Dollar-pegged stablecoins. 

However, Coinbase has made it clear that unlike typical savings accounts in the United States, any USD Coin loaned by a user is protected by neither the Federal Deposit Insurance Corporation (FDIC) nor the Securities Investor Protection Corporation (SIPC). The exchange also underscored that they are in no way offering a cryptocurrency interest account providing attractive rates on the assets of the customers.

Coinbase claimed:

“While the high interest rates are appealing, they can present varying levels of risk. You may find that your assets are loaned to unidentified third parties and subject to their credit risk, which could result in a total loss of your crypto holdings.”

From October 2019 to June 2020, Coinbase exchange  originally offered an APY of 1.25% on USD Coins. However, the reward was slashed significantly to just 0.15% after June 2020. With this new announcement, Coinbase has increased the interest for USD Coin holders by over 2,500%. 

USDC is the 8th largest crypto having a market capitalization of over US$25 billion. However, the most popular stablecoin is Tether (USDT), whose market cap is around US$62.5 billion, making it the 3rd largest cryptocurrency.

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